LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of EFU General Insurance Limited (EFUG) (Pakistan). The outlook of these Credit Ratings (ratings) remains positive.
The ratings reflect EFUG’s balance sheet strength, which AM Best categorises as strong, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).
The positive outlooks continue to reflect the ongoing strengthening of EFUG’s ERM capabilities. The company historically operated from sound silo risk management practices; however, in recent years, EFUG has undertaken steps to establish an enterprise-wide risk-aware culture and implement tools to manage its risk exposures consistently. AM Best expects that further anticipated improvements will lead to an ERM framework that is appropriate given the scale and complexity of EFUG’s operations.
EFUG’s balance sheet strength is underpinned by very strong risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by good internal capital generation. Offsetting factors include EFUG’s concentrated investment portfolio, which is restricted by regulation to Pakistan, and its exposure to non-rated reinsurers through mandatory cessions to the state-owned reinsurer.
EFUG has a track record of solid operating performance, with a five-year average return on equity of 15.0% (2014-2018), supported by positive underwriting and investment activity. The company generated robust and consistent technical profits, with a five-year (2014-2018) average combined ratio of 80.9%, demonstrative of EFUG’s underwriting discipline and prudent risk selections.
EFUG maintains a leading position in its domestic market, with a market share, as measured by gross written premiums (GWP), of approximately 24%, writing a diversified portfolio across non-life business segments. In 2018, the company’s GWP reached PKR 20.8 billion (USD 150.3 million), when combining conventional and Takaful operations. EFUG has leveraged its long-standing relationships with clients successfully to maintain a defendable competitive advantage, demonstrating its ability to navigate its challenging business environment.
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